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CA Final · Advanced Financial Management · Foreign Exchange Exposure and Risk Management

A trader buys 10 USD-INR futures contracts (USD 1,000 each) at Rs 83.10. The initial margin is Rs 1,500 per contract. The day's settlement price is Rs 82.95. What is the mark-to-market amount on the trader's account for the day?

The trader has a long position and the price fell by Rs 0.15, so the account is debited. The loss is 0.15 multiplied by USD 1,000 and by 10 contracts, which equals Rs 1,500 as variation margin.

  1. ACredit of Rs 1,500
  2. BDebit of Rs 1,500Correct
  3. CDebit of Rs 150
  4. DCredit of Rs 150

Explanation

Price fell by Rs 0.15 for a long position. Loss = 0.15 x 1,000 x 10 = Rs 1,500 debited as variation margin. A credit would arise if price rose. Rs 150 ignores the contract count.

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